Fate of Russian EU gas imports hinges on Kremlin or US decision – sanctions expert

LONDON (ICIS)– European imports of Russian gas hinge on US or Russian decisions whether to allow payments for deliveries, a sanctions specialist told ICIS.

Alexander Kolyandr, a non-resident senior fellow at the Center for European Policy Analysis (CEPA) and former strategist at Credit Suisse London, said there are two options for European buyers such as Hungary and Slovakia to pay for  gas after Russian state-owned Gazprombank was sanctioned by the US Treasury on November 21.

One option would be for the US to include Gazprombank on a general license on energy transactions,  which is regularly updated by the US Treasury and currently includes 12 entities allowed to handle energy-related transactions.

Gazprombank, which was sanctioned by the Treasury on November 21, is not on the list but could be included if the US is persuaded of the need to do so.

The other option would be for European buyers who continue to offtake Russian gas such as Slovakia’s SPP or Hungary’s MVM CEEnergy Zrt. to pay for the gas to any of the other state banks included on the licence.

Nevertheless, he said, Russian officials may refuse to accept this because under a scheme introduced by the Kremlin in 2022, European buyers can only pay for their Russian imports via Gazprombank Luxembourg.

Under the arrangement, buyers of Russian gas are required to open accounts in foreign currency and in rubles with Gazprombank. Importers would pay in a foreign currency and Gazprombank would sell it on the Moscow Exchange and credit the buyers’ accounts with rubles.

If the US fail to include Gazprombank on the general licence, Russian authorities would be forced to allow European buyers to pay via other banks, which would be “humiliating” for the Russian president Vladimir Putin, Kolyandr said.

“Nevertheless, the remaining buyers are all Russian allies, which means Russia could grant some flexibility,” he said.

The sanctions include a wind-down period for transactions involving Gazprombank until 20 December 2024 and for those related to the Sakhalin-2 oil and gas project in Russia’s Far East until 28 June 2025.

Nevertheless, if Gazprombank is included on the general licence on energy transactions, transactions – including payments to or from Gazprombank – could continue as usual but only in relation to energy deals, Kolyandr said.

A source close to Slovakia’s SPP said the company was monitoring the situation and confirmed that much will depend on “how Gazprom handles the situation.”

Traders told ICIS on Friday that the news about US treasury sanctions on Gazprombank kept prices volatile on the final session of the week.

One trader said, “it should be possible to pay Gazprom via other banks than Gazprombank” but that “the impact is not really clear yet”.

Another trader said, “it is making people nervous.”

TTF front-month prices tested €49.5/MWh in the early morning but retreated later in the afternoon, dropping below €47.5/MWh.

Additional reporting by Amun Lie